Long Okura

Bankruptcy And Divorce - Which Should Be Filed First?

A failing marriage and financial problems feed off each other, making both problems worse. This is a situation that Utah family law attorneys see more frequently than anyone would like. Which should they should do first - file for bankruptcy or get a divorce? This is a perfectly legitimate question, since the sequence of events has long-term consequences.

Get Professional Advice First

Bankruptcy and divorce laws are complex and everyone's personal situation is unique. There is no one-size-fits-all answer. There are a great many variables, so before making a final decision, discuss your own circumstances with both bankruptcy and divorce attorneys.

Creditors Don't Care if There Has Been a Divorce

Getting divorced won't make creditors disappear; they will continue to pursue both spouses. Many couples decide that it would be better to go on without the burden of these debts. If there was not sufficient income to pay the debts while paying the expenses of one household, it will be even more difficult to pay those bills when there are two separate households. If it would be most advantageous for both spouses to file for bankruptcy, that can obviously only be done before a divorce.

Chapter 7 vs. Chapter 13 Bankruptcy

Chapter 7 will discharge debts such as credit card and medical bills. Gross household income determines whether someone qualifies for a Chapter 7 bankruptcy. In some cases, it is better to get divorced before filing for Chapter 7 in order to reduce gross household income and qualify for Chapter 7. On the other hand, if both spouses file for bankruptcy before getting divorced, that will double the number of exemptions, protecting more property during the bankruptcy.

A Chapter 13 bankruptcy is often used when someone is behind on mortgage payments and wants to save their home. In a Chapter 13, the debtor(s) make a monthly payment to the bankruptcy trustee, much lower than is currently being paid on debts, and will repay missed mortgage payments over time.

For a couple who plan on divorcing, the amount of time needed to complete the bankruptcy process could be the deciding factor. A Chapter 7 bankruptcy would complete in six months or less, while a Chapter 13 takes three to five years to complete.

Alimony, Child Support and Certain Other Debts Cannot be Discharged

Child support, alimony, most student loans and some tax bills cannot be discharged in a bankruptcy. On the other hand, some property awards and debt payments awarded in a prior divorce could be discharged by the court. Planning both a divorce and bankruptcy at the same time (although not filing for both at the same time) could prevent unpleasant surprises later.

Long Okura - Attorneys at Law of Salt Lake City focus on Utah divorce and family law. Long Okura are also experienced mediators; while mediation is mandatory for Utah divorces, it also offers the opportunity to settle a divorce quicker, cheaper and with complete control over the final court order. To schedule an initial consultation for only $25, visit longokura.com.